Oil prices saw an increase on Tuesday as the balance between supply and demand appeared poised to tighten due to operational disruptions, robust demand, and voluntary output cuts.
U.S. West Texas Intermediate (WTI) crude futures climbed 18 cents to $79.30 a barrel by 1224 GMT, while Brent crude futures rose 19 cents, reaching $83.55 a barrel.
Market attention is focused on wildfires in remote western Canada, which have the potential to disrupt the country’s oil supply, noted Tony Sycamore, a market analyst with IG.
As Canada’s wildfire season commences, firefighters were engaged in efforts to contain blazes in British Columbia and Alberta, situated near the heart of the country’s oil sands industry. While there have been no reports of operational disruptions thus far, analyst Alex Hodes from energy brokerage StoneX cautioned that Canada’s production capacity of 3.3 million barrels per day is highly likely to be impacted.
Oil prices had settled approximately 1% higher in the preceding trading session due to increased demand from the U.S. and China.
The American Automobile Association (AAA) has projected a surge in road trips over the May 25-27 long weekend, reaching the highest level since 2000. Additionally, recent Chinese data revealed a third consecutive month of rising consumer prices, further supporting the demand outlook.
Market sentiment was also influenced by optimistic remarks from Iraq’s oil minister, Hayyan Abdul Ghani, during the weekend. Ghani affirmed Iraq’s commitment to the voluntary output cuts agreed upon by OPEC+ members, including the Organization of the Petroleum Exporting Countries (OPEC), Russia, and other non-OPEC producers, ahead of the upcoming meeting on June 1.
This statement marked a reversal from Ghani’s previous comments on Saturday, where he indicated that Iraq had already made sufficient voluntary reductions and would not support any further output cuts.